Video game sales plunged 20% in February

Video game sales in February suffered another double-digit monthly decline, plunging 20% to $1.06 billion, down from $1.33 billion in February 2011, according to a report released Thursday from the NPD Group Inc. 

Sales of consoles and games dropped 34% in January compared with a year earlier.

Game software struggled the most, dropping 24.4% to $464.4 million last month versus $601.4 million a year ago.

A strong release of the PlayStation Vita, Sony's Corp.'s latest portable game console, introduced in the U.S. on Feb. 22, helped to cushion the overall decline in hardware sales last month, but not enough to prevent an 18% decline in sales of consoles, including the Nintendo Wii.

The top 10 titles, listed below, continued to make up the bulk of the industry's revenue, accounting for 78% of total game sales in terms of units, NPD said. Still, that's less concentrated than it was a year ago, when the top 10 titles made up 94% of sales.

One notable new entry into the rarefied list of bestsellers is Kingdoms of Amalur: Reckoning, the debut fantasy action title of 38 Studios, an independent game company founded by former major league baseball pitcher Curt Schilling, whom we recently profiled.

Top 10 U.S. Video Games for February 2012

1. Call of Duty: Modern Warfare 3 (Activision Blizzard) 

2. Final Fantasy XIII-2 (Square Enix) 

3. UFC Undisputed 3 (THQ) 

4. Kingdoms of Amalur: Reckoning (38 Studios / Electronic Arts) 

5. Just Dance 3 (Ubisoft) 

6. NBA 2K12 (Take-Two Interactive Software) 

7. Soul Calibur V (Namco Bandai) 

8. Elder Scrolls V: Skyrim (Bethesda Softworks)

9. Twisted Metal 2012 (Sony) 

10. Battlefield 3 (Electronic Arts) 

Source: NPD Group Inc. 

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Screenshot of Final Fantasy XIII courtesy of Square Enix.

Nintendo: Wii are sinking

Spurned by consumers who now favor tablets, smartphones and higher-definition consoles, Nintendo Co. posted a 31% sales drop and swung to a loss last year.

The Japanese video game company on Thursday said revenue fell to $7.2 billion in the nine months ended Dec. 31, down from $10.4 billion the same period a year earlier. As result of the steep sales decline, Nintendo suffered a $623.2 million loss for that nine months, compared with a $638.8 million gain for the same period in 2010. The company did not break out quarterly results.

Nintendo saw declines across all of its products. Hard-core gamers abandoned its Wii console for higher-definition machines, including Microsoft Corp.'s Xbox 360 and Sony Corp.'s PlayStation 3, which also plays Blu-ray movies. The company also lost many casual players, many of whom turned to free-to-play social games and games on their mobile phones or tablets. 

Sales of the Wii, which was once so popular that Nintendo had trouble manufacturing enough to meet demand, dropped by more than a third to 896,000 units between April 1 and Dec. 31 last year, down from 1.37 million a year earlier.

Game sales for the Wii, on which Nintendo makes most of its profit, plunged 41%, to 8.9 million copies, from just more than 15 million in 2010. Nintendo saw similar declines for its line of handheld DS consoles and games.

There's more bad news to come. Nintendo also revised its financial forecast, saying sales for its fiscal year ending March 31 would likely be 16.5% lower than it had previously projected in October. It now expects annual revenue to be $8.5 billion, down from its earlier projection of $10.1 billion. Losses are also likely to be wider, growing to $837.8 million. In October, the company said it expected a $257.8 million loss.

But the game is far from over for Nintendo. The company had a formidable war chest at the end of the year -- $2.3 billion in cash and short-term investments. It's also scheduled to begin selling its next-generation game console this year, the Wii U. Sporting a new controller and high-definition graphics, the new device is expected to be more competitive with the Xbox 360 and the PS3.

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Photo: Sales of Nintendo products, such as the handheld DS, fell last year. Credit: Everett Kennedy Brown / EPA

Viewers watching more streaming video on game consoles

Video game consoles aren't just for gaming anymore.

Increasingly, people are using their Xbox 360, PlayStation 3 and Wii devices to stream movies and TV shows, according to a survey released Wednesday by the Nielsen Co.

Because all three consoles readily connect to the Internet, viewers can use them to access video-on-demand services like Netflix, Hulu Plus, YouTube, Major League Baseball Network and ESPN to watch on their TV screens rather than on small computer monitors.

And that seems to be just what consumers are doing. Streaming video accounted for 14% of the average time spent using Microsoft Corp.'s Xbox 360 in October, up from 10% a year earlier, according to a Nielsen survey of 3,000 people.

For Sony Corp.'s PS3, the share of streaming video was 15% this year, up from 9% last year. The shift was even more dramatic for Nintendo Co.'s Wii, which jumped to 33% from 20%.

Xbox and PlayStation users also spent an additional 5% of their time watching movies and television shows they paid to download, an option not available on the Wii.

That's good news for studios looking to make more money through digital distribution. Game consoles, along with the Apple TV, are the most popular ways to reach people who want to watch video on their high-definition televisions.

It's more troubling for television networks seeking to boost their ratings and ad revenue, however. The new data emphasize that consoles aren't stealing viewers' attention just with video games but also with content that serves as a direct substitute for traditional TV watching.

Game consoles have proved particularly effective for Netflix. An earlier Nielsen survey found that half of the users who utilize its streaming offerings do so on the PlayStation, Xbox or Wii.

Two of the consoles are also popular as DVD players. People spend 15% of their time on PS3s watching DVDs or Blu-ray discs. Sony's device is the only console that plays Blu-ray discs and is the best-selling Blu-ray player on the market. Xbox 360 users spend 9% of their time watching DVDs. The Wii does not play movies on discs.

Below is a Nielsen chart summarizing the survey results.

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Nintendo bleeds profits, banks on strong holiday

Nintendo Co., whose Wii and DS consoles fueled the video game industry's almost meteoric growth between 2006 and 2008, is rapidly falling back to earth.

The Japanese game company on Thursday posted a $925.6-million loss during the first six months of its fiscal year ended Sept. 30. That's up dramatically from last year, when Nintendo lost $26.5 million.

Sales were also down as demand for its games and consoles have cooled worldwide, leading to a 41% drop in revenue for the period. Nintendo had sales of $2.8 billion in the first half of its fiscal year compared with $4.8 billion the year before.

The company's newest product, the handheld 3DS console, has struggled to gain traction among consumers since its launch in March, leading Nintendo to drastically cut its price in August from $249.99 to $169.99.

As a result of the price cut and slowing sales of its games, Nintendo lowered its forecast for its fiscal year ending March 31, 2012. Instead of a $263-million gain the company had expected for the year, Nintendo now expects a $263-million loss. Revenue, meanwhile, is projected to hit $10.4 billion, down 12% from an earlier forecast of $11.8 billion that the company issued in July.

But the game's not completely over for Nintendo, analysts cautioned.

"There's no question that the Wii and the DS are at the end of their life cycles," said J.T. Taylor, an analyst with Arcadia Investment Corp. in Portland, Ore. "But there will be a flourish this holiday when Nintendo comes out with promotions and gift bundles. After that, Nintendo's long-term outlook depends on how successful their next console will be."

Even if Nintendo's next generation game console, dubbed Wii U, succeeds in bouncing back the company's market share, many question whether dedicated game consoles can compete with a plethora of connected devices that can funnel all sorts of entertainment options to consumers, from games and movies to television shows and music.

This is especially true of people who play games on a casual basis, the kind of audience on which Nintendo has traditionally thrived.

"Most people interested in playing games casually seem happy to play on their phones for free or close to free," Taylor said.

Still, Nintendo's ability to survive over the years has boiled down to the popularity of its game franchises, including Super Mario, Zelda, Pokemon and Metroid, all of which can only be played on Nintendo devices.

As a result, analysts believe that Nintendo has a solid future in the games business, just not one that will be as large as it once was.

"There is room for them in the market," said Michael Pachter, an analyst with Wedbush Securities, who estimated that Nintendo's business could shrink between 30% and 50%. "But the blue ocean just became very red."

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Video game sales fall in June

Video game sales plunged again in June, dropping 10% from the same period a year ago, as consumers greeted some new releases with a yawn and as sales continued to erode for Nintendo Co.’s once-popular Wii console.

Sales of games and the consoles required to play them totaled $1.03 billion last month, compared with $1.15 billion in June 2010, according to the NPD Group, a market research firm. The decline followed a 14% slide in the previous month to a four-year low for the video game industry.

The lower numbers do not necessarily spell doom for the entire sector. An increasing portion of the industry’s sales now come from digital channels such as Apple Inc.’s iTunes, Facebook Inc. or Microsoft Corp.’s Xbox Live online marketplace. Such sales are not captured by the monthly NPD sales reports.
John Riccitiello, chief executive of game publisher Electronic Arts Inc., estimated that digital distribution, which currently accounts for 25% of the industry’s sales, could reach 50% of overall game revenue within five years.

Still, traditional games sold at retail outlets as discs continue to be a vital component of the $40-billion global game industry. And monthly fluctuations such as the drops seen in May and June aren’t an indication of how the year will play out. That’s particularly true for video games, where the bulk of the industry’s sales occur in the months leading up to Christmas.

June’s result partly reflected weak sales of titles that launched last month, including Activision Blizzard Inc.’s Transformers: Dark of the Moon, THQ Inc.’s Red Faction: Armageddon, and Ubisoft Entertainment’s Child of Eden –- none of which made the list of top 10 selling titles for the month.

Sales of Nintendo’s Wii console also continued to slide, according to Michael Pachter, an analyst with Wedbush Morgan Securities. And its new handheld 3DS console is facing tough competition from Apple Inc.’s iPhones and iPads.

“The DS is losing share because of smartphones,” Pachter said. “Seventy percent of DS users are pre-teens. Within that population, 50% are perfectly happy with an iPhone or iPod Touch. So Nintendo has lost access to about half of that market.”

-- Alex Pham

Video game image from Red Faction: Armageddon. Credit: THQ

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